For many of the nine publicly traded business-to-consumer merchants tracked by Multichannel Merchant, 2007 went out with a whimper.
Four of the nine companies reported revenue declines for the fourth quarter, and only three of the five increases reached double digits. What’s more, only one company — 1-800-Flowers.com — reported double-digit growth in its bottom line. And with no signs of an economic turnaround, the outlook for this year doesn’t appear bright.
Economic turmoil has affected the U.S. economy as a whole, says Stuart Rose, managing director of Wellesley, MA-based investment bank of Tully & Holland, which tracks the companies for Multichannel Merchant. In the fourth quarter of 2007, Rose says the consumer product industry’s revenue and profits declined in comparison to the same period in 2006.
“This decrease is in line with the steep decline in consumer spending over the past few months,” he says. “As disposable income drops, consumers tend to reduce discretionary spending.?Retailers have been directly affected — J.C. Penney’s and Talbots’ revenues decreased by 4% and 8%, respectively, from 2006 to 2007.”
As a whole, Rose adds, “the industry’s performance has suffered through the economic difficulties on consumers and increases in energy prices.”
Frosty quarter for Coldwater Creek
Quarter ended: Feb. 2 The facts: Coldwater Creek ended its fourth quarter of fiscal year 2007 with disappointing numbers. Sales fell 6%, to $345.5 million, and the company sustained a net loss of $17 million, compared to a profit of $15 million in the same quarter last year. Officials blame the losses on a highly promotional retail environment accompanied by lower customer traffic and a difficult economy. An increase in net sales due to the addition of 66 premium retail stores and four merchandise clearance outlets was offset by a nearly 20% drop in same-store sales in 2007 — a key indicator of a retailer’s performance. The skinny: Officials for Sandpoint, ID-based Coldwater Creek “put a little too much blame on the macroeconomic numbers,” Rose says. “Moving forward, the company is going to attempt to combat these issues affecting profitability by lowering their SKU count by 20%, redirecting their marketing to a more targeted market, and being more prudent when it comes to promotional activities and discounting.”
Sales, bottom line down at Penney
Quarter ended: Feb. 2 The facts: Fourth-quarter sales for Plano, TX-based J.C. Penney Co. decreased 4.1%, to $6.39 billion, compared with $6.66 billion a year ago. For the quarter ended Feb. 2, the general merchant’s net income dropped nearly 10%, to $430 million, compared with $477 million a year ago. Same-store sales decreased 2.3%, while Internet sales rose 13.7%. The company ended the year with 2% more inventory per store, which, if the negative sales trends continues, will lead to a slightly lower margin than last year in the spring, Rose says. The skinny: “Given the slowdown, they are scaling back their new store plans, but continuing to add new lines, new brands, and stepping up its price message and non-peak sales message,” Rose says. “They want not to rely on holidays quite so much.”
Home run for Sport Supply
Quarter ended: Dec. 31 The facts: Dallas-based sports equipment merchant Sport Supply Group saw its revenue rise 10%, to $54.0 million, for the three-month period. Net income reached $453,000 after a loss of $871,000 for the same period last year. The revenue increase was due to a $2.6 million increase in sales by its road sales force and a $2.1 million increase in its catalog group sales. Rose says the seasonally less profitable quarter from October-December fared better because of increased focus on fall and winter sports, and a more profitable product mix. The skinny: The company plans to continue to grow sales volume via its road sales professionals and increased face-to-face sales calls to keep its profitability in upcoming quarters.
| Company | REVENUE | NET INCOME (LOSS) | ||||
|---|---|---|---|---|---|---|
| 12 months prior | Current quarter | Increase (decrease) | 12 months prior | Current quarter | Increase (decrease) | |
| ($000) | ($000) | |||||
| 1-800-Flowers.com | 329,866 | 334,202 | 1% | 16,922 | 19,256 | 14% |
| Coldwater Creek | 366,557 | 345,543 | (6%) | 15,907 | (17,019) | NM |
| Delia’s | 89,364 | 92,777 | 4% | 6,834 | 6,006 | (12%) |
| Gaiam | 72,781 | 81,806 | 12% | 4,267 | 4,200 | (2%) |
| J.C. Penney Co. | 6,664,000 | 6,390,000 | (4%) | 477,000 | 430,000 | (10%) |
| Red Envelope | 56,987 | 45,195 | (21%) | 5,307 | (4,334) | NM |
| Sport Supply Group | 49,384 | 54,089 | 10% | (871) | 452 | NM |
| Talbots | 638,004 | 587,397 | (8%) | 17 | (171,378) | NM |
| Williams-Sonoma | 1,254,933 | 1,374,355 | 10% | 121,064 | 124,564 | 3% |
| Source: Tully & Holland | ||||||